Fixed income revenues at Bear Stearns fell more than a fifth in the second quarter pushing capital markets profits down by more than a half to $377m (â¬283m), as the bank took a hit from the US sub-prime mortgage meltdown.

The bank, which is reportedly selling more than $4bn of mortgage-backed bonds to pay back investors in one of its hedge funds, said fixed income revenues dropped 21% to $926m in the three months to the end of May compared to the same period a year earlier.

On a conference call with analysts this morning, Sam Molinaro, the firm's chief financial officer, said that Bear Stearns adopted tighter lending standards in the mortgage business in response to early rumblings about a meltdown. The stricter standards resulted in lower captive mortgage origination business, Molinaro said.

While capital market revenues fell 9.7% to $1.86bn, profits in the division were down more than a half after the bank took a $227m charge related to its purchase of the minority stake in brokerage Bear Wagner Specialists it did not previously own.

The bank’s equities division also reported a drop in revenues, down 3% to $543m, despite record figures in equity derivatives and risk arbitrage.

Bear said that discounting the one-off revenues it earned in the second quarter of last year from the initial public offering of US exchange operator NYSE Group, equities revenues “would have increased significantly” year-on-year.

Wealth management revenues more than doubled to hit a record $341m, while asset management revenues, which were just $23m last year, rose to $184m.

Bear put the increase down to “higher management and performance fees and favorable investment performance”. Assets under management rose by a quarter to $60bn.

Group revenues climbed marginally to a record $2.5bn but pre-tax profits fell a third after taking into account the Bear Wagner costs.

Bear Sterns chief executive James Cayne said: “The diversity of our franchise is clearly demonstrated in the record net revenues generated this quarter. The global clearing services and wealth management segments reported record performance while results were also very strong from debt and equity underwriting, equity derivatives and leveraged finance.”

The bank's share price, which has fallen more than 8% this year, was down a further 2.5% to $145.81 in composite trading before the market opened in the US this morning.